Iran: The Currency Shock

Published on 15 May 2018.

By Staff Writer

In less than two months, Iran’s currency has significantly plummeted twice. Such sudden increase in price cannot be logically justified in economic terms; the change has been so drastic that the market has been faced with severe inflations.

According to an article published on 12th May 2018 (in a website that provides information on Iran’s diplomacy, and is owned by the regime’s former ambassador in France), an economic analyst named Mehdi Taghavi, believes that despite the ongoing changes in Iran’s economy, the current value of its currency is difficult to comprehend; and that even when taking into consideration America’s recent withdrawal from the nuclear deal, this devaluation makes little sense. Given the timeline of these two events, the currency devaluation needs more attention as it took place first.

According to Taghavi, this devaluation may have been, to some extent, the market’s reaction to America’s withdrawal from the nuclear deal; however, as suggested by some, additional factors seem to have contributed too; such as the delayed decision making of the Central Bank.

Whatever the cause of this inflation, it is of great concern for Iran’s society; people worry so much about their future that no amount of government proposals or temporary improvements can give them a lasting hope.

The fact of the matter is that Iran’s regime has been suffering for some time now, long before Trump withdrew from the nuclear deal. The regime’s economy is reaching a dead end now. All related plans and projects have either failed or declined. The market has also remained stagnant, with no noticeable improvements in its trades.

Along the same line, the future of Iran’s production remains just as vague. With the extreme fluctuations in currency value and with the ongoing economic crisis, the producers are more confused than ever; as they don’t know how much to purchase or sell their goods for. Even if they manage to sell their products, there is no guarantee that they can purchase the initial items for the same price again.

The market is in big trouble now; and if the situation persists, everyone involved, including those who purchase their products and industrial machinery from overseas, will be negatively impacted too. This will subsequently lead to societal complications such as exacerbation of unemployment.

The regime’s economist, Mehdi Taghavi, believes that Iran’s current and upcoming challenges are so serious in nature, that “crisis” is the only word to describe them. He also believes that the devaluation of Iran’s currency cannot be attributed solely to the issues surrounding its nuclear deal; especially that the inflations began in April, in other words, before the occurrence of the withdrawal from the nuclear deal.